Maryland
|
81-0559116
|
(State
or other jurisdiction of incorporation
|
(I.R.S.
Employer Identification No.)
|
or
organization)
|
1345
Avenue of the Americas, New York, NY
|
10105
|
(Address
of principal executive offices)
|
(Zip
Code)
|
PAGE
|
|
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Financial Statements
|
|
Consolidated
Balance Sheets as of September 30, 2006 (unaudited) and December
31,
2005
|
1
|
Consolidated
Statements of Income (unaudited) for the three and nine months ended
September 30, 2006 and 2005
|
2
|
Consolidated
Statements of Stockholders' Equity (unaudited) for the nine months
ended
September 30, 2006 and 2005
|
3
|
Consolidated
Statements of Cash Flows (unaudited) for the nine months ended September
30, 2006 and 2005
|
4
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
|
15
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
32
|
Item
4. Controls and Procedures
|
37
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
38
|
Item
1A. Risk Factors
|
38
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
39
|
Item
3. Defaults upon Senior Securities
|
39
|
Item
4. Submission of Matters to a Vote of Security Holders
|
39
|
Item
5. Other Information
|
39
|
Item
6. Exhibits
|
40
|
SIGNATURES
|
41
|
September
30, 2006(Unaudited)
|
December
31, 2005
|
||||||
|
|||||||
Assets
|
|||||||
Real
estate securities, available for sale
|
$
|
5,369,641
|
$
|
4,554,519
|
|||
Real
estate related loans, net
|
1,238,418
|
615,551
|
|||||
Residential
mortgage loans, net
|
863,788
|
600,682
|
|||||
Subprime
mortgage loans subject to future repurchase - Note 5
|
287,546
|
-
|
|||||
Investments
in unconsolidated subsidiaries
|
28,549
|
29,953
|
|||||
Operating
real estate, net
|
30,271
|
16,673
|
|||||
Cash
and cash equivalents
|
16,317
|
21,275
|
|||||
Restricted
cash
|
183,334
|
268,910
|
|||||
Derivative
assets
|
64,218
|
63,834
|
|||||
Receivables
and other assets
|
43,999
|
38,302
|
|||||
$
|
8,126,081
|
$
|
6,209,699
|
||||
Liabilities
and Stockholders' Equity
|
|||||||
Liabilities
|
|||||||
CBO
bonds payable
|
$
|
3,505,906
|
$
|
3,530,384
|
|||
Other
bonds payable
|
704,785
|
353,330
|
|||||
Notes
payable
|
153,957
|
260,441
|
|||||
Repurchase
agreements
|
2,197,780
|
1,048,203
|
|||||
Financing
of subprime mortgage loans subject to future repurchase - Note
5
|
287,546
|
-
|
|||||
Credit
facility
|
125,000
|
20,000
|
|||||
Junior
subordinated notes payable (security for trust preferred)
|
100,100
|
-
|
|||||
Derivative
liabilities
|
26,576
|
18,392
|
|||||
Dividends
payable
|
30,152
|
29,052
|
|||||
Due
to affiliates
|
9,938
|
8,783
|
|||||
Accrued
expenses and other liabilities
|
27,175
|
23,111
|
|||||
7,168,915
|
5,291,696
|
||||||
Stockholders'
Equity
|
|||||||
Preferred
stock, $0.01 par value, 100,000,000 shares authorized, 2,500,000
|
|||||||
shares
of 9.75% Series B Cumulative Redeemable Preferred Stock and 1,600,000
|
|||||||
shares
of 8.05% Series C Cumulative Redeemable Preferred Stock, liquidation
|
|||||||
preference
$25.00 per share, issued and outstanding
|
102,500
|
102,500
|
|||||
Common
stock, $0.01 par value, 500,000,000 shares authorized, 43,999,817
and
|
|||||||
43,913,409
shares issued and outstanding at September 30, 2006 and
|
|||||||
December
31, 2005, respectively
|
440
|
439
|
|||||
Additional
paid-in capital
|
784,234
|
782,735
|
|||||
Dividends
in excess of earnings
|
(10,923
|
)
|
(13,235
|
)
|
|||
Accumulated
other comprehensive income
|
80,915
|
45,564
|
|||||
957,166
|
918,003
|
||||||
$
|
8,126,081
|
$
|
6,209,699
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
|||||||||||||
Interest
income
|
$
|
140,330
|
$
|
88,021
|
$
|
378,446
|
$
|
254,035
|
|||||
Rental
and escalation income
|
834
|
1,871
|
3,616
|
4,850
|
|||||||||
Gain
on sale of investments, net
|
2,642
|
6,750
|
10,064
|
12,099
|
|||||||||
Other
income, net
|
288
|
3,208
|
4,545
|
4,594
|
|||||||||
144,094
|
99,850
|
396,671
|
275,578
|
||||||||||
Expenses
|
|||||||||||||
Interest
expense
|
100,239
|
58,681
|
265,113
|
163,238
|
|||||||||
Property
operating expense
|
1,041
|
594
|
2,808
|
1,827
|
|||||||||
Loan
and security servicing expense
|
1,553
|
1,483
|
4,961
|
4,646
|
|||||||||
Provision
for credit losses
|
2,682
|
4,091
|
5,868
|
5,990
|
|||||||||
Provision
for losses, loans held for sale - Note 5
|
-
|
-
|
4,127
|
-
|
|||||||||
General
and administrative expense
|
1,187
|
1,034
|
3,979
|
3,251
|
|||||||||
Management
fee to affiliate
|
3,475
|
3,316
|
10,420
|
9,895
|
|||||||||
Incentive
compensation to affiliate
|
3,094
|
2,416
|
8,780
|
5,271
|
|||||||||
Depreciation
and amortization
|
290
|
182
|
767
|
453
|
|||||||||
113,561
|
71,797
|
306,823
|
194,571
|
||||||||||
Income
before equity in earnings of unconsolidated subsidiaries
|
30,533
|
28,053
|
89,848
|
81,007
|
|||||||||
Equity
in earnings of unconsolidated subsidiaries
|
1,506
|
1,104
|
3,916
|
4,628
|
|||||||||
Income
taxes on related taxable subsidiaries
|
-
|
(43
|
)
|
-
|
(321
|
)
|
|||||||
Income
from continuing operations
|
32,039
|
29,114
|
93,764
|
85,314
|
|||||||||
Income
from discontinued operations
|
(12
|
)
|
86
|
212
|
2,051
|
||||||||
Net
Income
|
32,027
|
29,200
|
93,976
|
87,365
|
|||||||||
Preferred
dividends
|
(2,328
|
)
|
(1,523
|
)
|
(6,985
|
)
|
(4,570
|
)
|
|||||
Income
Available For Common Stockholders
|
$
|
29,699
|
$
|
27,677
|
$
|
86,991
|
$
|
82,795
|
|||||
Net
Income Per Share of Common Stock
|
|||||||||||||
Basic
|
$
|
0.68
|
$
|
0.63
|
$
|
1.98
|
$
|
1.90
|
|||||
Diluted
|
$
|
0.67
|
$
|
0.63
|
$
|
1.97
|
$
|
1.88
|
|||||
Income
from continuing operations per share of common stock, after
|
|||||||||||||
preferred
dividends
|
|||||||||||||
Basic
|
$
|
0.68
|
$
|
0.63
|
$
|
1.97
|
$
|
1.85
|
|||||
Diluted
|
$
|
0.67
|
$
|
0.63
|
$
|
1.97
|
$
|
1.84
|
|||||
Income
from discontinued operations per share of common stock
|
|||||||||||||
Basic
|
$
|
(0.00
|
)
|
$
|
0.00
|
$
|
0.01
|
$
|
0.05
|
||||
Diluted
|
$
|
(0.00
|
)
|
$
|
0.00
|
$
|
0.00
|
$
|
0.04
|
||||
Weighted
Average Number of Shares of
|
|||||||||||||
Common
Stock Outstanding
|
|||||||||||||
Basic
|
43,999,817
|
43,789,819
|
43,978,625
|
43,595,411
|
|||||||||
Diluted
|
44,136,956
|
44,121,263
|
44,091,003
|
43,961,044
|
|||||||||
Dividends
Declared per Share of Common Stock
|
$
|
0.650
|
$
|
0.625
|
$
|
1.925
|
$
|
1.875
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
|
Dividends
in Excess of
|
|
Accum.
Other Comp.
|
|
Total
Stock-holders'
|
||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Equity
|
|||||||||||||||||
Stockholders'
equity - December 31, 2005
|
4,100,000
|
$
|
102,500
|
43,913,409
|
$
|
439
|
$
|
782,735
|
$
|
(13,235
|
)
|
$
|
45,564
|
$
|
918,003
|
|||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(91,664
|
)
|
-
|
(91,664
|
)
|
||||||||||||||
Exercise
of common stock options
|
-
|
-
|
84,000
|
1
|
1,439
|
-
|
-
|
1,440
|
||||||||||||||||
Issuance
of common stock to directors
|
-
|
-
|
2,408
|
-
|
60
|
-
|
-
|
60
|
||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
93,976
|
-
|
93,976
|
||||||||||||||||
Net
unrealized (loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
31,775
|
31,775
|
||||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(637
|
)
|
(637
|
)
|
||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
763
|
763
|
||||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
6,801
|
6,801
|
||||||||||||||||
Reclassification
of net realized (gain) on derivatives designated as cash flow
hedges
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,351
|
)
|
(3,351
|
)
|
||||||||||||||
Total
comprehensive income
|
129,327
|
|||||||||||||||||||||||
Stockholders'
equity - September 30, 2006
|
4,100,000
|
$
|
102,500
|
43,999,817
|
$
|
440
|
$
|
784,234
|
$
|
(10,923
|
)
|
$
|
80,915
|
$
|
957,166
|
|||||||||
Stockholders'
equity - December 31, 2004
|
2,500,000
|
$
|
62,500
|
39,859,481
|
$
|
399
|
$
|
676,015
|
$
|
(13,969
|
)
|
$
|
71,770
|
$
|
796,715
|
|||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(86,661
|
)
|
-
|
(86,661
|
)
|
||||||||||||||
Issuance
of common stock
|
-
|
-
|
3,300,000
|
33
|
96,518
|
-
|
-
|
96,551
|
||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
628,330
|
6
|
9,491
|
-
|
-
|
9,497
|
||||||||||||||||
Issuance
of common stock to directors
|
-
|
-
|
2,008
|
-
|
67
|
-
|
-
|
67
|
||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
87,365
|
-
|
87,365
|
||||||||||||||||
Net
unrealized (loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(41,202
|
)
|
(41,202
|
)
|
||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,157
|
)
|
(7,157
|
)
|
||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,103
|
)
|
(1,103
|
)
|
||||||||||||||
Reclassification
of net realized foreign currency translation into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(626
|
)
|
(626
|
)
|
||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
38,701
|
38,701
|
||||||||||||||||
Reclassification
of net realized loss on derivatives designated as cash flow
hedges
into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
1,657
|
1,657
|
||||||||||||||||
Total
comprehensive income
|
77,635
|
|||||||||||||||||||||||
Stockholders'
equity - September 30, 2005
|
2,500,000
|
$
|
62,500
|
43,789,819
|
$
|
438
|
$
|
782,091
|
$
|
(13,265
|
)
|
$
|
62,040
|
$
|
893,804
|
Nine
Months Ended September 30,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows From Operating Activities
|
|||||||
Net
income
|
$
|
93,976
|
$
|
87,365
|
|||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities
(inclusive of amounts related to discontinued
operations):
|
|||||||
Depreciation
and amortization
|
767
|
629
|
|||||
Accretion
of discount and other amortization
|
(14,976
|
)
|
174
|
||||
Equity
in earnings of unconsolidated subsidiaries
|
(3,916
|
)
|
(4,628
|
)
|
|||
Distributions
of earnings from unconsolidated subsidiaries
|
3,916
|
4,049
|
|||||
Deferred
rent
|
(1,274
|
)
|
(1,776
|
)
|
|||
Gain
on sale of investments
|
(10,430
|
)
|
(13,893
|
)
|
|||
Unrealized
gain on non-hedge derivatives and hedge ineffectiveness
|
(4,421
|
)
|
(6,559
|
)
|
|||
Provision
for credit losses
|
5,868
|
5,990
|
|||||
Provision
for losses, loans held for sale
|
4,127
|
-
|
|||||
Purchase
of loans held for sale - Note 5
|
(1,511,086
|
)
|
-
|
||||
Sale
of loans held for sale - Note 5
|
1,507,588
|
-
|
|||||
Non-cash
directors' compensation
|
60
|
67
|
|||||
Change
in:
|
|||||||
Restricted
cash
|
34,398
|
(117,679
|
)
|
||||
Receivables
and other assets
|
(524
|
)
|
(1,016
|
)
|
|||
Due
to affiliates
|
1,155
|
(2,583
|
)
|
||||
Accrued
expenses and other liabilities
|
8,757
|
61,993
|
|||||
Net
cash provided by operating activities
|
113,985
|
12,133
|
|||||
Cash
Flows From Investing Activities
|
|||||||
Purchase
of real estate securities
|
(1,116,676
|
)
|
(815,728
|
)
|
|||
Proceeds
from sale of real estate securities
|
306,618
|
50,082
|
|||||
Deposit
on real estate securities (treated as a derivative)
|
-
|
(32,439
|
)
|
||||
Purchase
of and advances on loans
|
(1,267,511
|
)
|
(609,567
|
)
|
|||
Proceeds
from settlement of loans
|
-
|
1,024
|
|||||
Repayments
of loan and security principal
|
417,277
|
540,749
|
|||||
Margin
deposits on derivative instruments
|
(33,387
|
)
|
-
|
||||
Return
of margin deposits on derivative instruments
|
30,349
|
-
|
|||||
Margin
deposits on total rate of return swaps (treated as derivative
instruments)
|
(46,158
|
)
|
(39,099
|
)
|
|||
Return
of margin deposits on total rate of return swaps (treated as derivative
instruments)
|
89,255
|
-
|
|||||
Proceeds
from termination of derivative instruments
|
17,982
|
762
|
|||||
Proceeds
from sale of derivative instrument into Securitization Trust -
Note
5
|
5,623
|
-
|
|||||
Payments
on settlement of derivative instruments
|
-
|
(1,112
|
)
|
||||
Purchase
and improvement of operating real estate
|
(1,314
|
)
|
(188
|
)
|
|||
Proceeds
from sale of operating real estate
|
-
|
52,333
|
|||||
Contributions
to unconsolidated subsidiaries
|
(100
|
)
|
-
|
||||
Distributions
of capital from unconsolidated subsidiaries
|
1,504
|
9,122
|
|||||
Payment
of deferred transaction costs
|
-
|
(38
|
)
|
||||
Net
cash used in investing activities
|
(1,596,538
|
)
|
(844,099
|
)
|
|||
Continued
on Page 5
|
Nine
Months Ended September 30,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows From Financing Activities
|
|||||||
Issuance
of CBO bonds payable
|
-
|
442,034
|
|||||
Repayments
of CBO bonds payable
|
(27,716
|
)
|
(7,364
|
)
|
|||
Issuance
of other bonds payable
|
631,988
|
246,547
|
|||||
Repayments
of other bonds payable
|
(276,082
|
)
|
(98,786
|
)
|
|||
Repayments
of notes payable
|
(106,484
|
)
|
(327,080
|
)
|
|||
Borrowings
under repurchase agreements
|
3,300,477
|
675,500
|
|||||
Repayments
of repurchase agreements
|
(2,150,900
|
)
|
(182,547
|
)
|
|||
Draws
under credit facility
|
393,900
|
42,000
|
|||||
Repayments
of credit facility
|
(288,900
|
)
|
-
|
||||
Issuance
of junior subordinated notes payable
|
100,100
|
-
|
|||||
Issuance
of common stock
|
-
|
97,680
|
|||||
Costs
related to issuance of common stock
|
-
|
(1,129
|
)
|
||||
Exercise
of common stock options
|
1,440
|
9,497
|
|||||
Dividends
paid
|
(90,564
|
)
|
(84,205
|
)
|
|||
Payment
of deferred financing costs
|
(9,664
|
)
|
(1,683
|
)
|
|||
Net
cash provided by financing activities
|
1,477,595
|
810,464
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(4,958
|
)
|
822,559
|
||||
Cash
and Cash Equivalents, Beginning of Period
|
21,275
|
37,911
|
|||||
Cash
and Cash Equivalents, End of Period
|
$
|
16,317
|
$
|
860,470
|
|||
Supplemental
Disclosure of Cash Flow Information
|
|||||||
Cash
paid during the period for interest expense
|
$
|
248,594
|
$
|
153,122
|
|||
Cash
paid during the period for income taxes
|
$
|
244
|
$
|
443
|
|||
Supplemental
Schedule of Non-Cash Investing and Financing
Activities
|
|||||||
Common
stock dividends declared but not paid
|
$
|
28,600
|
$
|
27,369
|
|||
Preferred
stock dividends declared but not paid
|
$
|
1,552
|
$
|
1,016
|
|||
Deposits
used in acquisition of real estate securities (treated as
derivatives)
|
$
|
-
|
$
|
44,504
|
|||
Foreclosure
of loans
|
$
|
12,200
|
$
|
-
|
|||
Acquisition
and financing of loans subject to future repurchase
|
$
|
286,315
|
$
|
-
|
Real
Estate Securities
and
Real Estate Related Loans
|
|
Residential
Mortgage Loans
|
|
Operating
Real Estate
|
|
Unallocated
|
|
Total
|
||||||||
September
30, 2006 and the Nine Months then Ended
|
||||||||||||||||
Gross
revenues
|
$
|
317,138
|
$
|
75,878
|
$
|
3,851
|
$
|
(196
|
)
|
$
|
396,671
|
|||||
Operating
expenses
|
(2,026
|
)
|
(13,274
|
)
|
(3,006
|
)
|
(22,637
|
)
|
(40,943
|
)
|
||||||
Operating
income (loss)
|
315,112
|
62,604
|
845
|
(22,833
|
)
|
355,728
|
||||||||||
Interest
expense
|
(210,793
|
)
|
(46,696
|
)
|
-
|
(7,624
|
)
|
(265,113
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(562
|
)
|
(205
|
)
|
(767
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
1,975
|
-
|
1,940
|
1
|
3,916
|
|||||||||||
Income
(loss) from continuing operations
|
106,294
|
15,908
|
2,223
|
(30,661
|
)
|
93,764
|
||||||||||
Income
from discontinued operations
|
-
|
-
|
212
|
-
|
212
|
|||||||||||
Net
Income (loss)
|
$
|
106,294
|
$
|
15,908
|
$
|
2,435
|
$
|
(30,661
|
)
|
$
|
93,976
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
2,933
|
$
|
-
|
$
|
2,933
|
||||||
Total
assets
|
$
|
6,820,667
|
$
|
1,238,856
|
$
|
46,255
|
$
|
20,303
|
$
|
8,126,081
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
17,153
|
$
|
-
|
$
|
17,153
|
||||||
December
31, 2005
|
||||||||||||||||
Total
assets
|
$
|
5,544,818
|
$
|
606,320
|
$
|
36,306
|
$
|
22,255
|
$
|
6,209,699
|
||||||
Long-lived
assets outside the U.S.:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,673
|
$
|
-
|
$
|
16,673
|
||||||
Three
Months Ended September 30, 2006
|
||||||||||||||||
Gross
revenues
|
$
|
116,680
|
$
|
26,466
|
$
|
834
|
$
|
114
|
$
|
144,094
|
||||||
Operating
expenses
|
(731
|
)
|
(3,608
|
)
|
(1,088
|
)
|
(7,605
|
)
|
(13,032
|
)
|
||||||
Operating
income (loss)
|
115,949
|
22,858
|
(254
|
)
|
(7,491
|
)
|
131,062
|
|||||||||
Interest
expense
|
(78,696
|
)
|
(17,777
|
)
|
-
|
(3,766
|
)
|
(100,239
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(221
|
)
|
(69
|
)
|
(290
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
629
|
-
|
877
|
-
|
1,506
|
|||||||||||
Income
(loss) from continuing operations
|
37,882
|
5,081
|
402
|
(11,326
|
)
|
32,039
|
||||||||||
Income
from discontinued operations
|
-
|
-
|
(12
|
)
|
-
|
(12
|
)
|
|||||||||
Net
Income (loss)
|
$
|
37,882
|
$
|
5,081
|
$
|
390
|
$
|
(11,326
|
)
|
$
|
32,027
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
295
|
$
|
-
|
$
|
295
|
||||||
Nine
Months Ended September 30, 2005
|
||||||||||||||||
Gross
revenues
|
$
|
232,803
|
$
|
37,270
|
$
|
4,892
|
$
|
613
|
$
|
275,578
|
||||||
Operating
expenses
|
(3,236
|
)
|
(7,472
|
)
|
(1,878
|
)
|
(18,294
|
)
|
(30,880
|
)
|
||||||
Operating
income (loss)
|
229,567
|
29,798
|
3,014
|
(17,681
|
)
|
244,698
|
||||||||||
Interest
expense
|
(140,240
|
)
|
(22,646
|
)
|
(249
|
)
|
(103
|
)
|
(163,238
|
)
|
||||||
Depreciation
and amortization
|
-
|
-
|
(350
|
)
|
(103
|
)
|
(453
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
2,567
|
-
|
1,740
|
-
|
4,307
|
|||||||||||
Income
(loss) from continuing operations
|
91,894
|
7,152
|
4,155
|
(17,887
|
)
|
85,314
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
2,051
|
-
|
2,051
|
|||||||||||
Net
Income (Loss)
|
$
|
91,894
|
$
|
7,152
|
$
|
6,206
|
$
|
(17,887
|
)
|
$
|
87,365
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
10,269
|
$
|
-
|
$
|
10,269
|
Real
Estate Securities
and
Real Estate Related Loans
|
|
Residential
Mortgage Loans
|
|
Operating
Real Estate
|
|
Unallocated
|
|
Total
|
||||||||
Three
Months Ended September 30, 2005
|
||||||||||||||||
Gross
revenues
|
$
|
85,742
|
$
|
11,932
|
$
|
1,889
|
$
|
287
|
$
|
99,850
|
||||||
Operating
expenses
|
(2,460
|
)
|
(3,144
|
)
|
(618
|
)
|
(6,712
|
)
|
(12,934
|
)
|
||||||
Operating
income (loss)
|
83,282
|
8,788
|
1,271
|
(6,425
|
)
|
86,916
|
||||||||||
Interest
expense
|
(50,992
|
)
|
(7,588
|
)
|
2
|
(103
|
)
|
(58,681
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(119
|
)
|
(63
|
)
|
(182
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
724
|
-
|
337
|
-
|
1,061
|
|||||||||||
Income
(loss) from continuing operations
|
33,014
|
1,200
|
1,491
|
(6,591
|
)
|
29,114
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
86
|
-
|
86
|
|||||||||||
Net
Income (Loss)
|
$
|
33,014
|
$
|
1,200
|
$
|
1,577
|
$
|
(6,591
|
)
|
$
|
29,200
|
|||||
Revenue
derived from non-U.S. sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
1,917
|
$
|
-
|
$
|
1,917
|
||||||
(A)
Net of income taxes on related taxable subsidiaries.
|
Operating
Real Estate Subsidiary
|
|
Real
Estate Loan Subsidiary
|
|
Trust
Preferred Subsidiary
|
||||||
Balance
at December 31, 2005
|
$
|
12,151
|
$
|
17,802
|
$
|
-
|
||||
Contributions
to unconsolidated subsidiaries
|
-
|
-
|
100
|
|||||||
Distributions
from unconsolidated subsidiaries
|
(1,734
|
)
|
(3,686
|
)
|
-
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
1,940
|
1,975
|
1
|
|||||||
Balance
at September 30, 2006
|
$
|
12,357
|
$
|
16,091
|
$
|
101
|
Operating
Real Estate Subsidiary (A) (B)
|
Real
Estate Loan Subsidiary (A) (C)
|
||||||||||||
September
30,
|
December
31,
|
September
30,
|
December
31,
|
||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Assets
|
$
|
78,177
|
$
|
77,758
|
$
|
32,365
|
$
|
35,806
|
|||||
Liabilities
|
(53,000
|
)
|
(53,000
|
)
|
-
|
-
|
|||||||
Minority
interest
|
(463
|
)
|
(455
|
)
|
(183
|
)
|
(202
|
)
|
|||||
Equity
|
$
|
24,714
|
$
|
24,303
|
$
|
32,182
|
$
|
35,604
|
|||||
Equity
held by Newcastle
|
$
|
12,357
|
$
|
12,151
|
$
|
16,091
|
$
|
17,802
|
|
Nine
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
Revenues
|
$
|
6,493
|
$
|
8,287
|
$
|
3,996
|
$
|
5,195
|
|||||
Expenses
|
(2,541
|
)
|
(4,088
|
)
|
(25
|
)
|
(32
|
)
|
|||||
Minority
interest
|
(72
|
)
|
(77
|
)
|
(22
|
)
|
(29
|
)
|
|||||
Net
income
|
$
|
3,880
|
$
|
4,122
|
$
|
3,949
|
$
|
5,134
|
|||||
Newcastle's
equity in net income
|
$
|
1,940
|
$
|
2,061
|
$
|
1,975
|
$
|
2,567
|
(A) |
The
unconsolidated subsidiaries’ summary financial information is presented on
a fair value basis, consistent with their internal basis of
accounting.
|
(B) |
Included
in the operating real estate segment.
|
(C) |
Included
in the real estate securities and real estate related loans
segment.
|
Gross
Unrealized
|
Weighted
Average
|
||||||||||||||||||||||||||||||
Asset
Type
|
Current
Face Amount
|
|
Amortized
Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
Number
of
Securities
|
|
S&P
Equivalent
Rating
|
|
Coupon
|
|
Yield
|
|
Maturity
(Years)
|
||||||||||||
CMBS-Conduit
|
$
|
1,478,808
|
$
|
1,427,860
|
$
|
37,634
|
$
|
(11,373
|
)
|
$
|
1,454,121
|
200
|
BBB-
|
5.95%
|
|
6.50%
|
|
7.22
|
|||||||||||||
CMBS-
CDO
|
23,500
|
20,690
|
1,312
|
(38
|
)
|
21,964
|
2
|
BB
|
9.47%
|
|
11.86%
|
|
8.74
|
||||||||||||||||||
CMBS-Large
Loan
|
618,014
|
615,712
|
8,212
|
(305
|
)
|
623,619
|
54
|
BBB-
|
6.94%
|
|
7.11%
|
|
2.32
|
||||||||||||||||||
CMBS-
B-Note
|
245,567
|
233,080
|
6,035
|
(285
|
)
|
238,830
|
29
|
BB-
|
6.97%
|
|
7.72%
|
|
6.92
|
||||||||||||||||||
Unsecured
REIT Debt
|
979,598
|
994,447
|
16,656
|
(11,612
|
)
|
999,491
|
100
|
BBB-
|
6.37%
|
|
6.00%
|
|
6.33
|
||||||||||||||||||
ABS-Manufactured
Housing
|
91,839
|
86,526
|
1,644
|
(920
|
)
|
87,250
|
10
|
BB+
|
6.87%
|
|
7.74%
|
|
6.60
|
||||||||||||||||||
ABS-Home
Equity
|
697,486
|
683,286
|
6,803
|
(902
|
)
|
689,187
|
121
|
BBB
|
7.09%
|
|
7.55%
|
|
2.86
|
||||||||||||||||||
ABS-Franchise
|
79,096
|
78,513
|
1,561
|
(1,016
|
)
|
79,058
|
23
|
BBB
|
7.26%
|
|
8.21%
|
|
4.93
|
||||||||||||||||||
Agency
RMBS
|
1,091,022
|
1,097,009
|
2,511
|
(7,792
|
)
|
1,091,728
|
32
|
AAA
|
5.19%
|
|
5.18%
|
|
4.33
|
||||||||||||||||||
Subtotal/Average
(A)
|
5,304,930
|
5,237,123
|
82,368
|
(34,243
|
)
|
5,285,248
|
571
|
BBB+
|
6.23%
|
|
6.46%
|
|
5.27
|
||||||||||||||||||
Retained
securities (B)
|
37,555
|
34,119
|
233
|
(102
|
)
|
34,250
|
3
|
BBB-
|
7.71%
|
|
11.01%
|
|
3.48
|
||||||||||||||||||
Residual
interest (B)
|
50,143
|
50,143
|
-
|
-
|
50,143
|
1
|
NR
|
0.00%
|
|
18.77%
|
|
2.78
|
|||||||||||||||||||
Total/Average
|
$
|
5,392,628
|
$
|
5,321,385
|
$
|
82,601
|
$
|
(34,345
|
)
|
$
|
5,369,641
|
575
|
BBB+
|
6.19%
|
|
6.60%
|
|
5.23
|
(A) |
The
total current face amount of fixed rate securities was $4.2 billion,
and
of floating rate securities was $1.2
billion.
|
(B) |
Represents
the retained bonds and equity from the Securitization Trust as
described
in Note 5. These securities have been treated as part of the
residential
mortgage loan segment - see Note 2. The residual does not have
a stated
coupon and therefore its coupon has been treated as zero for
purposes of
the table.
|
Gross
Unrealized
|
Weighted
Average
|
||||||||||||||||||||||||||||||
Securities
in an Unrealized Loss Position
|
Current
Face Amount
|
|
Amortized
Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
Number
of
Securities
|
|
S&P
Equivalent
Rating
|
|
Coupon
|
|
Yield
|
|
Maturity
(Years)
|
||||||||||||
Less
Than Twelve Months
|
$
|
603,483
|
$
|
589,011
|
$
|
-
|
$
|
(2,589
|
)
|
$
|
586,422
|
82
|
BBB-
|
7.80%
|
|
8.32%
|
|
4.37
|
|||||||||||||
Twelve
or More Months
|
1,492,869
|
1,514,167
|
-
|
(31,756
|
)
|
1,482,411
|
178
|
A-
|
5.62%
|
|
5.30%
|
|
5.61
|
||||||||||||||||||
Total
|
$
|
2,096,352
|
$
|
2,103,178
|
$
|
-
|
$
|
(34,345
|
)
|
$
|
2,068,833
|
260
|
BBB+
|
6.25%
|
|
6.15%
|
|
5.25
|
Loan
Type
|
Current
Face
Amount
|
|
Carrying
Value
|
|
Loan
Count
|
|
Wtd.
Avg. Yield
|
|
Weighted
Average Maturity
(Years)
(D)
|
|
Delinquent
Carrying Amount (E)
|
||||||||
B-Notes
|
$
|
95,859
|
$
|
95,124
|
5
|
7.25
|
%
|
4.31
|
$
|
-
|
|||||||||
Mezzanine
Loans (A)
|
729,701
|
729,509
|
15
|
8.90
|
%
|
2.73
|
-
|
||||||||||||
Bank
Loans
|
209,691
|
209,813
|
5
|
7.80
|
%
|
4.25
|
-
|
||||||||||||
Whole
Loans (A)
|
74,993
|
75,238
|
2
|
11.94
|
%
|
1.90
|
-
|
||||||||||||
ICH
Loans (B)
|
130,287
|
128,734
|
74
|
8.64
|
%
|
1.24
|
6,040
|
||||||||||||
Total
Real Estate Related Loans
|
$
|
1,240,531
|
$
|
1,238,418
|
101
|
8.74
|
%
|
2.90
|
$
|
6,040
|
|||||||||
Residential
Loans
|
$
|
195,159
|
$
|
199,952
|
566
|
6.42
|
%
|
2.79
|
$
|
3,104
|
|||||||||
Manufactured
Housing Loans
|
673,956
|
663,836
|
19,148
|
8.46
|
%
|
6.05
|
12,928
|
||||||||||||
Total
Residential Mortgage Loans
|
$
|
869,115
|
$
|
863,788
|
19,714
|
7.99
|
%
|
5.32
|
$
|
16,032
|
|||||||||
Subprime
Mortgage Loans Subject
|
|||||||||||||||||||
to
Future Repurchase (C)
|
$
|
299,176
|
$
|
287,546
|
(A) |
Two
of these loans have contractual exit fees. Newcastle has begun accruing
the exit fee on one loan and will begin to accrue for the other if
and
when management believes it is probable that such exit fee will be
received.
|
(B) |
In
October 2003, pursuant to FIN No. 46, Newcastle consolidated an entity
which holds a portfolio of commercial mortgage loans which has been
securitized. This investment, which is referred to as the ICH CMO,
was
previously treated as a non-consolidated residual interest in such
securitization. The primary effect of the consolidation is the requirement
that Newcastle reflect the gross loan assets and gross bonds payable
of
this entity in its financial
statements.
|
(C) |
See
Note 5.
|
(D) |
The
weighted average maturities
for the residential loan portfolio and the manufactured housing loan
portfolio were calculated based on constant prepayment rates (CPR)
of
approximately 30% and 9%,
respectively.
|
(E) |
This
face amount of loans is 60 or more days
delinquent.
|
Real
Estate Related Loans
|
|
Residential
Mortgage Loans
|
|||||
Balance
at December 31, 2005
|
$
|
4,226
|
$
|
3,207
|
|||
Provision
for credit losses
|
605
|
5,263
|
|||||
Realized
losses
|
(2,931
|
)
|
(2,821
|
)
|
|||
Balance
at September 30, 2006
|
$
|
1,900
|
$
|
5,649
|
Weighted
average life (years) of residual interest
|
3.1
|
|||
Expected
credit losses
|
5.3
|
%
|
||
Weighted
average constant prepayment rate
|
28.0
|
%
|
||
Discount
rate
|
18.8
|
%
|
Total
securitized loans (unpaid principal balance)
|
$
|
1,304,950
|
||
Loans
subject to future repurchase (carrying value)
|
$
|
287,546
|
||
Retained
interests (fair value)
|
$
|
84,393
|
||
Weighted
average life (years) of residual interest
|
2.78
|
|||
Expected
credit losses
|
5.3
|
%
|
||
Effect
on fair value of retained interests of 10% adverse change
|
$
|
(2,533
|
)
|
|
Effect
on fair value of retained interests of 20% adverse change
|
$
|
(4,681
|
)
|
|
Weighted
average constant prepayment rate
|
28.0
|
%
|
||
Effect
on fair value of retained interests of 10% adverse change
|
$
|
(3,507
|
)
|
|
Effect
on fair value of retained interests of 20% adverse change
|
$
|
(6,005
|
)
|
|
Discount
rate
|
18.8
|
%
|
||
Effect
on fair value of retained interests of 10% adverse change
|
$
|
(2,393
|
)
|
|
Effect
on fair value of retained interests of 20% adverse change
|
$
|
(4,695
|
)
|
Loan
unpaid principal balance (UPB)
|
$
|
1,304,950
|
||
Delinquencies
of 60 or more days (UPB)
|
$
|
26,020
|
||
Net
credit losses
|
$
|
-
|